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T H E ON LY A LL-DIGITA L ALL-B USINESS R ESOUR CE FOR CR ED IT UNIONS THE BRANCH BUSINESS ISSUE JUNE 2017 VOLUME 12 ISSUE 6 Introducing BRANCH BUSINESS ABOUT US THE ONLY ALL-DIGITAL ALL-BUSINESS RESOURCE FOR CREDIT UNIONS PUBLISHING TEAM Tim O Hara Editor & Publisher tim cubusiness.com Patti Manzone Designer UP FRONT Tim O Hara IN BRANCH PRODUCT SALES Nick Brown CU TRAINING Kenneth C. Bator E-SIGNATURES Pem Guerry BRANCH STRATEGIES Chad Davis CFO CURRENCY Hafizan Hamzah MARKETING MATTERS Bruce A. Clapp BRANCH TECH Michael Ball COOPERATIVE GOVERNANCE Clinton Koker BRANCH BUSINESS Kaitlin Morrison MEMBER BUSINESS Suneera Madhani SUBSCRIPTIONS Credit Union BUSINESS is published monthly (12 issues per year) by CU Business Magazine Inc. A one-year Digital membership is 75 yr An online membership form is available at www.cubusiness.com register. TEAMBUILDER https creditunionbusiness.com the-teambuilder SALES AND ADVERTISING Tim O Hara Publisher tim cubusiness.com or 561-282-6015 1 CONTACT INFORMATION Credit Union BUSINESS Magazine P.O. Box 2223 Palm Beach FL 33480 (561) 282-6015 (561) 588-7711 (fax) tim cubusiness.com 2 C R E D I T U N I O N B U S I N E S S J U N E 2 0 1 7 C U B U S I N E S S . C O M Ashok Kumar Associate Publisher ashok cubusiness.com T HE ONLY AL L -DI GI TAL AL L -BUSI NE SS RE SOURCE FOR CRE DI T UNI ONS THE BRANCH BUSINESS ISSUE JUNE 2017 VOLUME 12 ISSUE 6 Introducing BRANCH BUSINESS TABLE OF CONTENTS JUNE 2017 VOLUME 12 ISSUE 6 TAB THE ONLY ALL-DIGITAL ALL-BUSINESS RESOURCE FOR CREDIT UNIONS What does a G ISSUE THE LENDIN ISSUE 9 9.95 VOLUME 9 JANUARY 2015 Suze Orman ons Tells Credit Uni It s Your Time Managing Risk in 2015 ding Bank Execs Hea to Credit Unions sophy Change in Philo is Key to Success 75 subscription buy High Quality monthly magazine. Website with 72 back issues 700 articles available On Demand RANC THE B IN H BUS RAIN ESS T SUE ING IS VOLUM JUNE 2014 6 9.95 E 9 ISSUE RESOURCE FOR CREDIT UNIONS THE ONLY ALL-DIGITAL ALL-BUSINESS THE MOBILE BANKING ISSUE 4 APRIL 2017 VOLUME 12 ISSUE Making Noise with a Silent Ad Campaign EVA LAMERE ALSO IN THIS ISSUE thE E-Comm ERCE ISSUE lending tools for a New generation of homeowner eMortgages by Keith Kelly may 2014 volUmE 9 ISSUE 5 9.95 Defining Accurate Base Pay Compensation and Its Importance for the CEO JERRY P. NELSON All The CU g) (CU Trainin Stars cy) Paul Nunn Hollis (CFO Curren liance Update) Emily More rson-Kapke (Comp Ande Jennifer (CU Mobile Mortgage) Keith Kelly s (CU CEO) James Collin (Lending Solutions) son Rex John k (CU Content) Laura Enoc Dios (CU Outreach) Miriam De by Roy W. Urrico Credit Unions Keepin g Up With Banks for Mobile Banking Services Products Per House hold What Does it Mean to Your Staff by Jack Kelly 6 8 13 18 21 24 28 UP FRONT Title Tim O Hara IN BRANCH PRODUCT SALES 34 37 40 44 BRANCH TECH s Collins by Jame Way The Best nches Bra to Build ock is to Kn wn Them Do Revitalizing the Branch by Laura Enock ing The Chang siness Bu Face of Lending Michael Ball Nunn Jennifer Hollis Paul Emily Mor from left Rex Johnson Top row James Collins Miriam De Dios Middle row Laura Enock Bottom row Anderson -Kapke Keith Kelly Sales Force Compensation Nick Brown COOPERATIVE GOVERNANCE Clinton Koker Tips to Get It Right at Your Credit Union Conflicting Messages Create Poor Employee Morale BRANCH BUSINESS Kaitlin Morrison CU TRAINING A New Napkin Kenneth C. Bator The Strategic Map Indirect Auto Lending Best Practices MEMBER BUSINESS Suneera Madhani E-SIGNATURES Pem Guerry 3 Things the Credit Union Industry Needs to Know About E-Signatures BRANCH STRATEGIES Chad Davis How Credit Unions Can Cut Costs for Small Business Customers The Evolving Branch Visit CFO CURRENCY Hafizan Hamzah How Do We Measure Portfolio Performance MARKETING MATTERS Making the Most of Mergers Bruce A. Clapp Managing Member Impact Through Marketing 3 C R E D I T U N I O N B U S I N E S S J U N E 2 0 1 7 C U B U S I N E S S . C O M UP FRONT BY TIM O HARA I Announcing Branch BUSINESS t s been more than a dozen years since we launched Credit Union BUSINESS our monthly magazine designed to help every department head in every department of the USA s 5 000 credit unions. In the beginning we hired freelance writers to report on lending and marketing and finance and compliance and more. But these days we have partnered with the cream of the crop of well-known credit union experts to point out the very best way to successfully run a credit union Next up about a year later came the launch of our brilliant website www.creditunionbusiness.com which contains a tremendous amount of the helpful information noted above. Only now the website contains exactly 77 archived monthly digital issues. I know because I just spent several minutes counting them all. That means that there are more than 100 separate articles on the website all are searchable thanks to our Google Search Bar. It certainly comes in handy when you want an answer to specific questions. Another great feature of the website is the simple design that placed different topics at the top of the page. Here s how it looks Because President Trump s Winter Whitehouse his Mar-a-Lago resort is only about two miles (and a world) apart from my office I decided to have a little fun with an early subscription promo for Branch BUSINESS. It went like this When President Trump s Mar-a-Lago resort opened you could join for cheap - only 25 000 Right now you can do the same thing with Branch BUSINESSonly 75 for all branches In order to get Branch BUSINESS (BB) into the handsof as many branch employees as possible we ve created an introductory subscription price that lowers the barriers of entry to just 75 for all branches that the credit union operates and all of the branch managers MSR s and tellers that will benefit from the tailored information. So far we re averaging 13 branches per 75 group subscription. I hope you will take advantage of this bargain. And I promise that it will never rise to Mar-a-Lago s current membership fee of 200 000 per member And now introducing Volume 1 Issue 1 of Branch BUSINESS eNewsletter Please sign up all of your branch personnel for a low 75 cost Subscribers can click on any topic and individual articles on that subject will magically appear A few years ago I noticed a spike in subscription receipts coming from branch managers supervisors member service representatives and tellers from those branches. The number grew to the thousands and it became clear that Branch BUSINESS is a needed information source. So on June 1st we proudly launched Volume 1 Issue 1 of our monthly Branch BUSINESS eNewsletter to complement CU Business. 6 C R E D I T U N I O N B U S I N E S S J U N E 2 0 1 7 Thanks for reading Tim C U B U S I N E S S . C O M Experience the Power of Plus. Let Advisors Plus guide your path to optimization and growth. The Power of Problem Solving The Power of Potential The Power of Profit With 200 years of industry experience our consultants have been there fixed that. We combine experience with analytics to identify high-impact growth opportunities. We create high-ROI results you can take straight to the bottom line. The Power of Partnership Our team works with your team on products and marketing to delight your members. Bring your credit union to the Plus side Call 727.299.2535 or visit us at AdvisorsPlus.com. IN BRA NC H PRODU C T S A L E S BY NICK BROWN Sales Force Compensation Tips to Get It Right at Your Credit Union When it comes to motivating credit union sales teams there s still nothing that quite measures up to a carefully thought-out and wellstructured sales compensation plan. If your CU is looking to improve its sales results these strategies will help your compensation plan accomplish the purpose intended of it. R ecently I connected with a credit union that was looking to improve its sales results. The leader I was speaking with lamented that sales in the past had struggled significantly and while the CU was doing better now there was still much room to improve. Knowing that opinions of what great sales look like can vary in the industry I asked this frustrated leader to define for me what struggled significantly meant. Well he said for example a few years ago we hadn t sold a single GAP policy for an entire year. So we decided to up our incentive to 100 and see if that helped the team want to sell better. The next year we sold one. My next question was Are you still offering that incentive and are you hiring Seriously though as sales leaders haven t we all been there We have a struggling team and we think Well maybe if I just increase sales payouts I will get better sales results Unhappily though we often learn that increasing payouts alone rarely leads to increased production for a struggling team. Sales compensation and sales team motivation can be a complicated topic at times. So why do we still use them The fact is that carefully thought-out and structured sales compensation plans are one of the best tools we have as sales leaders to universally motivate our sales teams. They have stood the test of time and despite efforts to disprove their legitimacy they 8 C R E D I T U N I O N B U S I N E S S continue to produce results. That being the case let s explore a few things you can do to help your credit union s compensation plan accomplish its purpose. Understand Sales Compensation Strategies for the Different Performance Levels The reason my credit union contact s incentive strategy did not work is because it failed to appeal to the level of sales employees he had. For any sales team you will typically have three categories of sales employees who are differentiated by their level of sales production. J U N E 2 0 1 7 C U B U S I N E S S . C O M IN BRANCH PRODUCT SALES They are Star Performers salespeople who are always exceeding goals targets and expectations Core Performers the majority of most sales teams whose production tends to meet expectations Laggards the bottom of the sales producers who tend to be satisfied not reaching expectations either consistently or never According to Thomas Steenburgh and Michael Ahearne in their 2012 HBR article titled Motivating Salespeople What Really Works Some salespeople have greater ability and internal drive than others and a growing body of research suggests that stars laggards and core performers are motivated by different facets of comp plans. Star Performers This research suggests that Star Performers are more motivated by greater levels of recognition and compensation for reaching higher levels of sales. Tiered earning potential drives star performance to higher levels and keeps these stellar sellers focused and consistent. Moreover leaving a Star s sales compensations uncapped will ensure that his or her performance doesn t cap out at the incentive cap. Steenburgh suggests that Laggards typically need not only the carrots but also the sticks. The carrots that work best with Laggards are 1) mile-marker bonuses that help them keep pace with their sales goals and 2) rewarding them for reaching expectations on say a quarterly basis. The stick that helps Laggards move forward is a bit of peer pressure. This can be accomplished in two ways 1) aligning Laggards with Core and Star Performers for a team bonus and 2) from time to time publishing sales numbers publicly for the team to see. If you are looking to improve sales success in your credit union look at where your sales staff is performing at and then consider specific sales compensation strategies that appeal to those specific levels. This is actually where my credit union contact went wrong. The credit union s sales staff were performing at a Laggard level. The strategy the CU employed was more appropriate to motivate Star Performers. You could say the 100 incentive was over their heads and didn t catch on. Use a Varied Approach Core Performers This group of sellers prides itself on reaching performance levels that are expected of it. Cores are more inclined to increase sales when given multiple levels of achievement. This is to say that if given an expectation of A they should also be given a B and C level to reach for. Also as these sellers reach for higher expectations they are more motivated by prizes gifts and other non-cash rewards than they are by money. Laggards The group of sales employees who make up your Laggards tends to be among the most difficult to motivate with your sales compensation plan. Generally speaking Laggards are comfortable where they are with what they are currently making and with not reaching above what they normally produce without some nudging. 9 C R E D I T U N I O N B U S I N E S S As discussed your sales team will be made up of employees who sell at different levels of performance. For most teams this will be split with Stars making up 15 percent of the team Cores making up 70 percent and Laggards comprising the bottom 15 percent. While this is the case for most sales teams it requires that the compensation plan take a varied approach and not cater to only one level. For many credit unions this situation represents an opportunity to improve. Last year I worked to help launch a new outbound call center at a medium-sized credit union. The focus of this team was to recapture loans from competing financial institutions and the goals were quite lofty 20 million in the next year with four agents. We knew that in order to reach this goal there needed to be a carefully structured sales compensation plan that appealed to all three levels of performance and motivated the team to perform consistently to reach this target. J U N E 2 0 1 7 C U B U S I N E S S . C O M IN BRANCH PRODUCT SALES The credit union put together a sales compensation plan that offered a few things. First it designed a tiered commission structure for loan volume. In order to hit 20 million in the next year each agent needed to average 400 000 in funded loan volume per month. This was set as the minimum expectation. To encourage higher levels of performance additional tiers were set at 500K and 600K. Here is how incentives were paid based on agent loan volume for the month Less than 400K 1.00 per 1 000 funded loan volume Greater than 400K 2.00 per 1 000 on total loan volume 500K to 600K 3.00 per 1 000 on the funded loan volume above 500K Greater than 600K 4.00 per 1 000 on the funded loan volume above 600K In the first full month on the phones one agent funded only 325 000. Because this individual missed the minimum expectation s he earned only 325 in commission. Another agent funded 450 000. Because this individual exceeded the expectation s he was paid the full 2 per 1 000 and earned 900 in commission. Finally another agent funded 650 000 and earned 1 500 in commission (Up to 500K 1 000 Up to 600K 300 Over 600K 200). Second additional goals and incentives were set for ancillary and core product sales. Some of the more applicable products such as GAP and Payment Protection were given tiered incentive structures based on penetration percentages. Lastly agents were also given a cumulative quarterly bonus if they reached their quarterly goal of 1.6 million. This cumulative bonus rewarded agents who reached their quarterly goals and stayed on target throughout the year. For instance if the agent funded only 1.5 million in the 1st quarter he or she would not receive the bonus. To be eligible for the 2ndquarter bonus he or she would need to fund not only the quarterly goal of 1.6 million but also an additional 100K. This varied approach worked very well. It appealed to Star Performers by rewarding higher sales volumes. It defined target performance for Core Performers and encouraged them to reach higher with additional tiers. And lastly it motivated Laggards to reach for the target performance so as not to lose out on commissions and bonuses. Build a Sales Compensation Plan for Each Team Many credit unions will build unique sales compensation plans for their mortgage team investment team business services team and insurance division. However for the rest of the credit union there will be only one plan. But is this approach effective Recently I finished working with a credit union in Georgia to help it launch a new lending center (i.e. the team who would be responsible for the loan applications submitted over the phone and online). The team was moving away from a 3rd-party company that had been managing this task for years. The goal was to handle the process in house and improve the funding ratio. This 3rd-party company had done an excellent job helping the credit union maintain a 50 percent funding ratio. However after doing some research surveying and benchmarking against a number of other credit unions with lending centers we felt this team could reach a funding ratio of at least 70 percent and increase loan volume by about a million dollars per month. This research turned up a number of best practices and a few not so great ones. One area that surprised me was the sales comp structure. Generally many branch plans will base their lending commissions on pure volume and those lending centers that are underperforming have the same structure. In contrast the higher-performing lending centers those with a funding ratio at or above 70 percent had sales compensation plans that were different from the branch structure and focused their comp plan on the funding ratio. 10 J U N E 2 0 1 7 C U B U S I N E S S . C O M C R E D I T U N I O N B U S I N E S S IN BRANCH PRODUCT SALES Each sales team in the credit union has different opportunity and a different mission. This means the CU needs a sales compensation plan that rewards different behaviors. As it applies to lending the behavior we want to promote in the branch is to uncover and capture additional loan opportunity. A commission that focuses on loan volume makes sense. For the lending center which has become the primary source for direct lending at most credit unions and receives large numbers of applications each day the behavior we want to promote is funding every approvable loan that is submitted. Commissions that focus on loan volume lead employees to focus on the larger loans submitted and discourage them from capturing the smaller loan requests. Set Pay to Encourage Sales Activity In his book What Your CEO Needs to Know About Sales Compensation Mark Donnolo suggests that when developing a new compensation plan or assessing one that is already operating to first start with the position s target pay and to define a pay mix. Target pay is the total take-home pay an average employee in a specified position would expect to make. For simplification purposes target pay would include only the employee s hourly rate and what he or she can reasonably expect to make in sales incentives commissions and bonuses. It leaves out the value of additional benefits. Pay mix then looks at what percentage of the target will be hourly and what percentage will come from the employee s sales activity. Clearly this will vary since one sales position will offer higher or lower sales opportunity than another. Each position should be assessed separately. For example a mortgage loan officer has a significantly higher sales commission potential than a teller s sales incentive plan. So when looking at the pay mix be sure to consider questions like these How much time does the position spend in the sales process The greater the time the higher the percentage of pay should be based on sales pay. How profitable are the sales closed in this position to the credit union The higher the profitability the higher the percentage of sales pay. How much time does the position spend developing new sales opportunities Positions focused on new sales should have a greater percentage of their total pay coming from sales activity. Other factors should be considered to make the best decision on pay mix. The idea is that target pay and pay mix should create a situation where the employee is encouraged to sell in order to reach the level of pay he or she needs and desires. 11 C R E D I T U N I O N B U S I N E S S J U N E 2 0 1 7 C U B U S I N E S S . C O M IN BRANCH PRODUCT SALES Putting It All Together In closing your sales compensation plan is vital to the success of your credit union s sales goals. This isn t just money you need to pay because everyone else is offering it and your employees feel entitled. The sales comp plan should be used strategically to target sales deficiencies motivate higher performance and retain top sales talent. When assessing your plan take time to do these things for each of your sales teams 1. Create a target pay and pay mix to encourage and reward proactive sales behaviors. 2. Review the sales compensation structure to determine if it promotes or inhibits the key behaviors that produce higher performance. 3. Identify where your Star Performers Core Performers and Laggards are and how you can use a varied approach to motivate each level to reach higher sales production. And as with all major decisions be sure to get support and buy-in from all levels of leadership when rolling out any changes to your sales compensation plan. Nick Brown Consulting established and founded by Nick Brown in 2015 is a credit union specific sales training group dedicated to bringing a proactive sales approach to every credit union. Nick Brown Consulting accomplishes this aim by providing sales consulting and training to enhance branch sales outbound sales and lending center sales. With an emphasis on lending and cross-sales Nick s goal is empowering credit unions to add value in the life of every member in every interaction. Engage Nick Brown directly at 801-8605807 or nick nickbrownconsulting.com. Ask about his credit union specific workshops and online sales training featured at www.nickbrownconsulting.com. 12 C R E D I T U N I O N B U S I N E S S J U N E 2 0 1 7 C U B U S I N E S S . C O M CU TRA INING BY KEN C. BATOR A New Napkin The Strategic Map When devising a strategic plan does your credit union opt for the impromptu napkin route or the multi-paged written binder. Neither approach is ideal. The Strategic Map provides a happy medium between the two. This two-sided one-pager combines the simplicity of the napkin with the sophistication of the lengthy physical document. ith Strategic Planning Season as I like to call it right around the corner I thought this is the perfect time to share one of my favorite tools the Strategic Map. While I m a big fan of the value of the napkin as a tool to record the impromptu strategy for a new venture or new program it s a temporary tool at best. Napkins get wet. They get ripped. They get left in the pocket of a pair of pants that gets thrown into the wash. All of which has happened to me before. The other extreme is to compile one of those 150page strategic plan binders. The value of the traditional written plan has come into question in recent years. I would argue that there is still value in the process if your credit union is actually going to use such a document as a tool and not just something you can throw at the regulator and say See we have a strategy For me I m one of those crazy people who actually will take a 150-page plan off the shelf and use it as a tool on a regular basis. Case in point when I had the pleasure of leading five credit union professionals a number of years back we compiled a 90-page plan for the year. We included everything of a critical nature organization drivers brand elements goals individual objectives event calendars and much more. I brought that binder to every meeting. That plan was used as a valuable tool. 13 C R E D I T U N I O N B U S I N E S S J U N E 2 0 1 7 C U B U S I N E S S . C O M W We would refer to it when we got stuck on a topic or idea. It helped us to remember the big picture as well as our logic when we compiled it. With each meeting that physical plan became even more valuable as I wrote notes on it. I crossed things out. I switched things around with arrows. We used that physical plan not as a set of directives that were set in stone but as a foundation with which to make decisions throughout the year. There were times we changed an objective because while our original logic was sound our environment or opportunity had changed. Having the written plan in front of us allowed us to build upon that original logic rather than just discounting it or worse forgetting it all together. TURN ON YOUR TRAINERS 4 CU withTEAMBUILDER. TRAINING www.cubusiness.com teambuilder buy CU TRAINING Today however I find that getting clients to actually bring their written strategic plan to executive and board meetings takes an act of God. This is somewhat understandable. Who really wants to carry around a binder to a meeting like a teenager in high school between periods rushing to class Furthermore I ve found with more and more clients that the act of writing the strategic plan is almost a hindrance. Please don t misunderstand me there is almost always value in the action of compiling the plan whether it s 20 pages or 1 000. It truly helps in connecting the dots and in understanding the alignment among the brand culture and strategy what I call the B C S Formula. However with my clients who are clearly addicted to accomplishment the act of compiling the plan can take time away from execution. One CEO I worked with who frequently used that quoted phrase had his team accomplish most of the strategy after the strategic retreat before the darn plan was even written Another recent client was also quite focused. The plan was far from complete but the client executed impeccably on the goals before the written document had been compiled. As I told this particular client with some clients I would be worried about the written plan or lack thereof. But this client began executing goals immediately after setting them. Obviously I would rather a credit union execute at a high level than write objectives down and forget about them. My experience with my addicted-to-accomplishment client led me to create something in between the napkin and a full strategic plan. I call it the Strategic Map. Think of it like the CliffsNotes of your strategy. TURN ON YOUR TRAINERS 4 CU withTEAMBUILDER. TRAINING 14 C R E D I T U N I O N B U S I N E S S The Strategic Map is simply one piece of paper with critical components of the company s unique B C S Formula on each side. The example above comes from one of my clients State Highway Patrol Federal Credit Union (SHPFCU) in Columbus Ohio. There s a straightforward example of the Strategic Map. The first page focuses on three organization drivers the mission vision and values. www.cubusiness.com teambuilder buy J U N E 2 0 1 7 C U B U S I N E S S . C O M THEY SAY... GOOD THING. We make it great. Cummins Allison self-service coin counters can transform the way your branch manages coin. Customers enjoy a quiet convenient and easy-to-use coin-redemption experience while you see tangible bottom-line benefits. With multiple machine choices and hands-free coin-management programs your staff can spend more time interacting with customers. Increase branch traffic enhance customer loyalty and improve teller line efficiencies. It s a small change that can make a big difference. Simple yet effective branch automation technologies from Cummins Allison build branch traffic and allow your staff to focus on what matters most more meaningful engagement with customers. CHANGE is a MAKE A CHANGE AT cumminsallison.com traffic TAB TRAINING CU Why leave out the history and the service standards you may ask. I m not suggesting any of the three drivers listed are any more important than the two we have left off the map. Again this is meant to be the CliffsNotes to the overall strategic plan. Much like a novel the highlights won t include entire chapters. The map is intended to be a tool for strategic meetings and strategic decision-making. While the history is important the front side doesn t necessarily lend itself to paragraphs or a timeline although a short timeline might fit in the lower left-hand corner if necessary. More important many of the critical elements of the history should already be reflected in the mission vision and values. Case in point the values listed in our example from SHPFCU are a direct reflection of the virtues held dear by the Ohio State Highway Patrol the very members the credit union was established for from the very beginning of its history. The service standards are excluded from the Strategic Map for a slightly different reason. While similar to our reasoning above in that the service standards are born of the values standards are a tool in and of themselves. They should be posted and provided to staff in multiple ways. They are also in place to guide daily decision-making. Conversely the Strategic Map is a tool to guide more big picture strategic decision-making. For example many years ago I sat in a board meeting where the group was having a passionate discussion as to whether they should outlay 16 C R E D I T U N I O N B U S II N E S S B U S N E S S the expenditure for a robust home-banking system that year. After some slightly heated give-and-take over the expense the chairperson stood up. She pointed to a sheet that listed the credit union s vision statement and reminded everyone of the portion of it that read We will be a leader in technology. She then stated rather bluntly that the board and executive management needed to either find the money in the budget for the desired home-banking system or change the vision statement before the end of the meeting. They found the money in the budget. These are the types of decisions where a Strategic Map comes in handy. The other side of the Strategic Map focuses on a key piece of the strategy the goals. The iceberg is there again to remind us how everything fits in the B C S alignment. In this case the goals are the foundation of the S and the initial brand drivers the strategic plan and the marketing plan. They are listed in as much detail as possible. This is why I suggest that clients laminate the Strategic Map and give one to all members of executive and middle management. This allows people to easily carry the maps to meetings without them getting ripped or wet like our recently mentioned napkin. It also enables management to conveniently make notes with a marker right on the map. I ve been asked before in today s age of technology isn t the Strategic Map a rather archaic and J J UU NN EE 22 00 11 77 C U B U S I N E S S . C O M CU TRAINING TAB low-tech tool It is but it also works. I love technology but sometimes you just need to write stuff down The action of writing helps to create comprehension and retention more so than typing onto a smartphone app. Plus doing the latter has a tendency to tick people off. They assume you re sending an email to your friends about happy hour rather than paying attention to the meeting. They want employees to be focused during the meeting and not multitasking. The Strategic Map enhances rather than detracts from that focus. Plus the map if used correctly within the organization is something employees will refer to on a frequent basis which will add to the comprehension factor. The Strategic Map also allows room for a relevant visual in the lower left-hand corner. In the example shown we chose to include the building block visual information Create a new map. The economy takes a turn in a significant way positive or negative that wisely forces a change in strategy Create a new map. Three executives get canned for drinking too much bubbly during the company holiday party Well you get the picture ... and yes this does happen. The point being is that the Strategic Map allows for quick flexibility and change without going back and rewriting the entire plan. Best of luck with the creation and more important the execution of your 2018 strategic plan. And if you would really rather just use the back of a napkin instead of a Strategic Map that s fine too. Just make sure that if it is a black napkin you use a silver-colored Sharpie. Ken Bator is the author of The Formula for Business Success B C S and the founder of Bator Training & Consulting Inc. (BTC) Ken helps credit unions create environments where employees actually want to come to work and members want to keep coming back. BTC accomplishes this aim through a combination of Branding Culture Building and Strategic Planning. This is the unique B C S Formula created by Bator and featured in his latest book. To have BTC facilitate your next strategic planning retreat contact Ken directly at 714-681-2821 or kbator btcinc.net. Learn more about BTC s training and strategic planning sessions at www.btcinc.net or www.speakermatch.com profile kenbator . as a reminder that the organization s strategic goals are interrelated. Another client chose to include a schematic created for decision-making purposes. Using that space of the Strategic Map for a visual that is relevant to the unique B C S alignment of your business will only enhance its effectiveness as a tool. The beauty of the Strategic Map especially for my overachieving clients is if you have accomplished most or even all of the goals you simply throw out the old one and create a new map. This is also of value for fast-moving companies and those in quickly changing environments. The board of directors and management decide to alter direction based upon some new critical C R E D I T U N I O N B U S II N E S S B U S N E S S 17 J J UU NN EE 22 00 11 77 C U B U S I N E S S . C O M E- S IG NATU RES BY PEM GUERRY 3 Things the Credit Union Industry Needs to Know About E-Signatures W With business increasingly being conducted online electronic signatures are going nowhere. On top of their safety and security benefits they have a lot to offer credit unions including greater online lending and increased cost savings. These three facts will ensure the validity of your CU s e-signatures. hether consumers are shopping for a new home or securing a car loan mobile transactions are here to stay. Today s credit union customers expect convenience and they re foregoing long lines and instead conducting business online. That s why credit unions are increasingly using e-signatures. They keep the digital process secure and enable customers to safely sign documents anywhere they have internet access from work home or even their local soccer complex. Plus electronic signatures can provide credit unions with the potential for more online lending and cost savings. In 2016 total credit union loan balances rose more than 10 percent according to the Credit Union National Association (CUNA) which is the fastest pace since 2005. The economic outlook for credit unions in 2017 looks just as rosy with a projected 2.5 percent growth. CUNA also predicts credit union membership will grow by 3.5 percent and loans will grow 10 percent in 2017. With such an optimistic outlook we expect to see more credit unions going digital and incorporating a secure e-signature solution a win-win for both the member and the credit union. For example Alamo Federal Credit Union a leading credit union in San Antonio Texas made the switch from paper loans to 18 C R E D I T U N I O N B U S I N E S S J U N E 2 0 1 7 C U B U S I N E S S . C O M digital ones and has since experienced significant cost savings and increased customer satisfaction. Before the addition of e-signatures there was one step of the loan application process that continually frustrated Alamo members and employees alike the signature. Credit union members who lived out of town or even those who lived nearby and were simply time-crunched often had trouble making the time to visit a branch and sign loan documents. Alamo has always focused on providing excellent customer service and the credit union saw this challenge as the perfect opportunity to introduce e-signatures. It chose to implement cloud-based digital signatures a highly secure type of electronic signature that permanently embeds all legal evidence in each signature encrypts documents and ensures greater document security and integrity. E-SIGNATURES What does a G ISSUE THE LENDIN ISSUE 9 9.95 VOLUME 9 JANUARY 2015 Suze Orman ons Tells Credit Uni It s Your Time Managing Risk in 2015 ding Bank Execs Hea to Credit Unions sophy Change in Philo is Key to Success 75 subscription buy High Quality monthly magazine. Website with 72 back issues 700 articles available On Demand RANC THE B IN H BUS RAIN ESS T SUE ING IS VOLUM JUNE 2014 6 9.95 E 9 ISSUE RESOURCE FOR CREDIT UNIONS THE ONLY ALL-DIGITAL ALL-BUSINESS THE MOBILE BANKING ISSUE 4 APRIL 2017 VOLUME 12 ISSUE Making Noise with a Silent Ad Campaign EVA LAMERE ALSO IN THIS ISSUE thE E-Comm ERCE ISSUE lending tools for a New generation of homeowner eMortgages by Keith Kelly may 2014 volUmE 9 ISSUE 5 9.95 Defining Accurate Base Pay Compensation and Its Importance for the CEO JERRY P. NELSON All The CU g) (CU Trainin Stars cy) Paul Nunn Hollis (CFO Curren liance Update) Emily More rson-Kapke (Comp Ande Jennifer (CU Mobile Mortgage) Keith Kelly s (CU CEO) James Collin (Lending Solutions) son Rex John k (CU Content) Laura Enoc Dios (CU Outreach) Miriam De by Roy W. Urrico Credit Unions Keepin g Up With Banks for Mobile Banking Services Products Per House hold What Does it Mean to Your Staff by Jack Kelly Way The Best nches Bra to Build ock is to Kn wn Them Do s Collins by Jame Many credit unions feature digital signature technology as part of their overall concierge banking services. Our members love it because it s convenient for them and very simple to use said Alicia Alvarez loan manager at Alamo. It allows them to sign from virtually anywhere. Adoption of Alamo s digital process has grown quickly with the number of digitally signed documents more than doubling year over year since 2012. As credit unions incorporate digital signature technology it s important to understand three key facts to make sure their customers signatures are valid and secure where the document lives and who owns it. That is vastly different from dependent e-signatures which use proprietary technology that exists outside the public domain. The technology requires you to access the vendor s server to verify the document typically by clicking on a link. If that link becomes invalid if the vendor goes out of business or if you sever the relationship then you can no longer validate the document which is a big risk if your signatures are ever challenged in court. by Laura Enock Nunn Jennifer Hollis Paul Emily Mor from left Rex Johnson Top row James Collins Miriam De Dios Middle row Laura Enock Bottom row Anderson -Kapke Keith Kelly ing The Chang siness Bu Face of Lending 1. Independent e-signatures keep you in control. When choosing an e-signature provider it s important to know the difference between an independent and dependent e-signature. Independent E-SignaturesTM often known as digital signatures are valid forever because they adhere to international published standards. This guarantees they will always be discoverable even if they fall into disuse. And publickey infrastructure (PKI) permanently embeds the legal evidence of each signature into the signed document. With an independent digital signature you decide 19 C R E D I T U N I O N B U S I N E S S 2. Authentication options and audit trails ramp up security. Identity authentication is the process of making certain that only the right people have access to sensitive information and documents. Such verification is especially important to ensure electronic transactions are secure and legitimate. Because cyber-attacks are on the rise (2016 saw the biggest increase in cyberattacks in more than 10 years according to PwC) it s important to have a digital signature solution that provides multiple and customizable authentication options. Credit unions may choose from a variety of authentication options to ensure member data is J U N E 2 0 1 7 C U B U S I N E S S . C O M E-SIGNATURES TAB the gained opportunity of being more efficient said Access EVP and COO John Hays. If we spend less time closing loans then we should have more time to go out and find new borrowers. The tide is turning toward all things digital and secure. Digital signatures are an important part of that trend as credit unions look to stay relevant and competitive. secure. These choices include passwords shared secret questions text message authentication or knowledgebased authentication. Perhaps the most secure option is multi-factor authentication which employs more than one identity authentication measure thereby mitigating the risk of documents falling into the wrong hands. Digital signature platforms with detailed audit trails ensure you have a record of each step of the signature process. That trail should include data about every aspect of the transaction including user authentication each person s signature views of the document downloads opt-outs and more. In addition to being a security measure the audit trail ensures you can defend any and all signatures and signed documents from repudiation or challenge. Pem Guerry is executive vice president of SIGNiX the first independently verifiable cloud-based digital signature solution which combines workflow convenience with superior security. Learn more about what makes SIGNiX different at www.signix.com 3. E-signatures mean faster closings and increased customer satisfaction. The majority of consumers now prefer to apply for loans online especially younger borrowers according to PwC. For credit unions offering e-signatures is the next logical step for improved customer service. Texasbased Access Community Credit Union increased its monthly number of loans closed online by 97 percent after adopting Independent E-signaturesTM in August 2013. Eighty percent of the credit union s loans were originated by phone so offering the capability to securely sign online was a perfect complement to the CU s already mobile-savvy customer base. In addition to providing a streamlined mobile service for consumers the savings on postage and back-end efficiencies more than justify the cost of using an e-signature solution. For us another win is 20 C R E D I T U N I O N B U S II N E S S B U S N E S S J J UU NN EE 22 00 11 77 C U B U S I N E S S . C O M BRA NC H ST RATEG I ES BY CHAD DAVIS The Evolving Branch Visit A new appointment study has identified service and timing preferences for branch visits. A closer look reveals not only the types of transactions that motivate people to come into the credit union branch but also the business hours during which they prefer to engage in a face-to-face consultation. Glean keen insight from the results to improve your CU s branch service. new study of the patterns of consumers scheduling appointments with their financial institutions offers insights on which transactions bring people to branches and when they prefer to consult on their financial needs. This research by analysts at FMSI a Kronos Company supports the high-profile role that branch service plays in omni-channel service delivery. Even with advances in remote delivery facilitating mobile loan applications and access to a full range of services online many members still choose to conduct some of their business face to face with financial professionals. And they appreciate the option to schedule an appointment to do so. At financial institutions that include appointment-scheduling apps among their mobile offerings in fact our study found that branch visits by appointment outnumber walk-ins during several prime business hours. The FMSI Appointment Study analyzes proprietary data on nearly 1 500 appointments scheduled at more than 160 branches located across North America in February 2017. Applying findings from this snapshot of consumer behavior may help your credit union improve branch service and performance. At the same time it can help you evaluate the usefulness of offering members the option to schedule appointments for branch visits. 21 C R E D I T U N I O N B U S I N E S S J U N E 2 0 1 7 C U B U S I N E S S . C O M A Pinpointing member preferences One primary aim of our analysis was to uncover patterns in time and day of the week preferences for scheduling appointments. At branches included in this study visits by appointment outnumbered walkin traffic during the morning and late afternoon hours. The most common hours to schedule appointments were at 10 a.m. 11 a.m. and 4 p.m. In comparison walk-in traffic was typically low in the morning and most prevalent around the lunch hour tapering off through the afternoon. Fridays which are paydays for many people have traditionally been the busiest days for banking and that pattern was reflected at branches included in our research. Visits by appointment outpaced walk-ins at TURN ON YOUR BRANCH SUPERVISORS & MANAGERS withTEAMBUILDER. 4 BRANCH BUSINESS www.cubusiness.com teambuilder buy BRANCH STRATEGIES TAB these locations on Fridays Saturdays and Thursdays suggesting that accountholders take advantage of the option to book appointments on days when they expect the branch to be a busy place. The study also quantified appointments kept vs. no-shows. The vast majority of accountholders who took the time to schedule an appointment showed up and met with branch staff. During the study period 84 percent of appointments were assigned and completed 12 percent were canceled before the appointment and only four percent were no-shows. Of those no-shows 43 percent occurred during the 9 a.m. and 10 a.m. time slots suggesting that it may be helpful to send reminders the day before appointments. A final focus of our study was to identify the types of services requested by consumers scheduling branch visits. Most of the appointments involved lending consultations including consumer loans mortgages auto loans and home equity lines of credit. This finding underscores the continuing role of the branch network in generating revenue by bringing in new loans. Other categories specified when scheduling appointments included new membership enrollment account services questions business services credit card issues and requests to have documents notarized. Across the board the ability to find out in advance what services members were requesting facilitated scheduling to ensure that member service professionals with the corresponding skills and expertise were on hand to complete those transactions and consultations. allow customers to pay for purchases and accrue special discounts and other promotions. All of these innovations support more personalized service that acknowledges customers preferences saves them time and or money and rewards loyalty. The results of our study suggest several management strategies to improve frontline member service and branch efficiency and productivity. Make members omni-channel experience as seamless as possible. For all the current enthusiasm for mobile and other remote channels keep in mind that members tend to embrace new services without relinquishing their expectations that other options remain in place. Offering a mobile appointment app underscores that your credit union provides a full range of channel options and makes all of them conveniently accessible. Even members who rely on mobile and online access for routine transactions may appreciate the option to schedule appointments to seek guidance from financial professionals on more complex matters. Optimize your frontline resources to drive service and revenue. Inviting members to schedule branch appointment saves them time and simultaneously provides branch managers with valuable data for smarter scheduling. Financial professionals trained to provide specialized services can be scheduled to meet member demand. They can therefore be ready to serve members with the appropriate materials lined up in advance to streamline the interaction. As a result employees spend less time waiting for work and the Applying the findings The growing acceptance of appointment-scheduling apps in financial services mirrors other examples of how technology is changing the retail experience. Companies like Sprint and Apple also offer their customers the option to schedule appointments rather than stand in line at a store and McDonald s is experimenting with touchscreen kiosks where customers can place their order and then take a digital location device so that their meals can be delivered to their tables. Starbucks and Subway offer apps that 22 C R E D I T U N I O N B U S II N E S S B U S N E S S J J UU NN EE 22 00 11 77 C U B U S I N E S S . C O M BRANCH STRATEGIES TAB right staff are available to serve the right members at the right time thereby increasing branch efficiency and productivity and enhancing revenue production. Take a data-driven approach to improving sales and service. Appointment-scheduling and lobbytracking software provides useful information about what services members want and when they are most likely to visit a branch for the kinds of interactions that result in increased sales. Detailed information about branch traffic patterns can guide decisions about scheduling sales training and marketing based on demand for services at each location. Data for this study was gathered from financial institutions that use the Kronos FMSI Appointment Concierge and lobby tracker software. Additional analysis and management tips based on the FMSI Appointment Study are included in a new white paper available on our website https www.kronos.com resources industry banking. Chad Davis is senior industry marketing manager Financial Services Practice Group Kronos which is a leading provider of workforce management and human capital management cloud solutions. Kronos industry-centric workforce applications are purposebuilt for financial institutions of all sizes. He can be reached at chad.davis kronos.com. 23 C R E D I T U N I O N B U S II N E S S B U S N E S S J J UU NN EE 22 00 11 77 C U B U S I N E S S . C O M CFO CURRENC Y BY HAFIZAN HAMZAH How Do We Measure Portfolio Performance Your credit union has probably seen or heard the debate What is a better measure of fixed-income performance book yield or total return And the answer is it depends. They both have their benefits and limitations. Find out what these strengths and weaknesses are in terms of your CU s portfolio performance. popular debate in the banking world considers the question What is a better measure of fixed-income performance book yield or total return However book yield is more of an accounting measure than a performance measure. Further attempting to measure performance using book yield fails to account for the dynamic nature of market risk factors that affect an asset s ongoing performance. Another method of measuring financial performance is total return. It is important to note that any reference to total return in this article is related to actual realized returns not a forward-looking horizon analysis. Total return is a more powerful measure of fixed-income performance because it more accurately reflects risk and return over a specified time period. Thus it is the preferred performance measure in the asset management community. In this article we ll define each measure and break down the benefits and limitations of each as well as discuss how performance is commonly measured and used. A original YTM and all payments occurring on time (i.e. no defaults or credit losses). YTM also can be thought of as the bond s internal rate of return (IRR). YTM calculations require a price par value coupon rate and term to maturity. As the terms imply a market YTM will use the current market price and a book yield will use the book price. Both measures (market and book) rely on the assumptions of the YTM calculation. These assumptions present major limitations to yield-based performance analysis particularly for book yield. To that effect a bond s real return can vary greatly from its purchase YTM given changes in reinvestment rates and holding period. Therefore book yield has limitations as a performance measure even for the simplest of security types such as Treasury notes. Exhibit 1 Same Security Different Yields UST 8% 11 15 2021 Investor 1 Investor 2 Purchase date 10 30 2006 10 31 2011 Term to maturity 15yrs 10yrs Yield 4.86% 2.05% Investor 3 10 31 2016 5yrs 1.33% Yield to Maturity A bond s yield to maturity (YTM) is the anticipated annual rate of return assuming the security is purchased at a specific price and held until final redemption with all coupon payments being reinvested at the bond s 24 C R E D I T U N I O N B U S I N E S S We also like to say a yield is stuck in time. That is because it relies on the pricing of future risk for an asset in a particular market environment (rates spreads curve slope etc.) while assuming the coupon payments will always be invested at that yield. Market risks are non-stationary and a yield will not account for how the market prices the risk of a particular asset JM A YE U N 22 00 11 77 C U B U S I N E S S . C O M CFO CURRENCY TAB as the present value of future yields and higher current returns relative to other assets should translate into higher realized yield over the life of the asset. As with any other performance measure there are limitations to total return. First if there is a high degree of uncertainty surrounding the valuation of an asset then the confidence in a return series for that asset will be lower. In other words valuing an onthe-run Treasury note or agency MBS is fairly simple and straightforward given the depth of those markets. However off-the-run sectors are more susceptible to pricing errors particularly when relying on third-party pricing services. Second we must be careful not to rely on returns as predictors of future performance. As the common mutual fund disclaimer states Past performance is not indicative of future results. To evaluate expected returns going forward we prefer to rely more heavily on a risk adjusted expected return or option-adjusted differently over time. In that way accounting yields spread (OAS) framework in calculating ex-ante also miss the economics of a particular asset. Look estimates of risk. at Exhibit 1 as an example. Three different investors purchase the exact same bond at three different points Where Returns Come From in time. Because of different rate environments and As mentioned above one of the drivers of return is different terms to maturity the book yields are different change in price. The market value of a security is a for each investor but all three investors will experience function of its sensitivity to a variety of macro factor the same economic performance going forward. The risks. Since these risk factors are observable in the reported yields are different for no other reason than market portfolio managers are able to derive what they started at different points in time. drove returns for any specific period. For instance Exhibit 2 Total Return In simple terms a time-weighted total return accounts for the change in market value between two periods (typically monthly) the coupon income received and any periodic distributions of principal (including gain loss on premium discount). While yields can be thought of as anticipated or promised returns this method of performance measurement provides a more timely and accurate reflection of risk and return at any given time. In this way total return can be thought of a tightening in MBS spreads would explain an appreciation in price for mortgage assets. This return attribution is a key component of effective portfolio management serving as one of the nodes in the feedback loop that managers rely on to drive investment decisions (see Exhibit 2). The information provided by this practice allows managers to make adjustments to their decision-making process which in turn should help managers generate greater and more consistent returns. 25 C R E D I T U N I O N B U S II N E S S B U S N E S S J J UU NN EE 22 00 11 77 C U B U S I N E S S . C O M CFO TAB CURRENCY Measuring Portfolio Returns To properly evaluate portfolio performance many market participants choose to compare or benchmark their portfolio to a market index. As an example some financial institutions use LIBOR Swap rates as a benchmark due to their reasonableness as a proxy for funding costs. Benchmarks help to put returns in perspective by providing a point of reference. Additionally many managers use benchmarking to manage risk. For instance if a manager has a mandate to manage a bond portfolio against a five-year Treasury index the manager would likely want to maintain a duration that is close to that of the index. By doing so the investor is keeping the portfolio s sensitivity to changes in rates in line with that of the benchmark. Therefore returns should come from thoughtful portfolio construction rather than deriving returns for changes in rates which is not something a manager can control. Concluding Thoughts Unfortunately simple measures of yield can have the unintended effect of keeping investors misinformed and in the dark as to the portfolio s true risk return profile. Yields have embedded within them unrealistic assumptions that are often unrepresentative of reality. Even more egregious is the book yield which uses an outdated price and is by no means a valid measure of either expected or realized return. Some investors dismiss total return as a performance measurement tool simply because their intention is to hold the asset to maturity. As this analysis shows the value of total With 20 billion of investments under management ALM First is an SEC-registered investment advisor acting as an unbiased third party offering commission-free fee-based services to over 200 financial institutions across the country. Services include Asset Liability Management Investment Advisory Merger Valuations Hedging with Derivatives Loan Profitability Analysis ALM Validations Investment Portfolio Analysis MSR Valuations Training and Education and more... 800-752-4628 www.almfirst.com 26 C R E D I T U N I O N B U S II N E S S B U S N E S S J J UU NN EE 22 00 11 77 C U B U S I N E S S . C O M CFO CURRENCY TAB return analysis in effectively communicating risk and performance is independent of whether or not an asset is held to maturity. Even for portfolios that account for assets at historical cost simply holding higher-performing assets to maturity earns higher spread income when compared with other lower-return assets. This framework allows us to manage risk more effectively on an ongoing basis and by doing so we should be able to grow stakeholder value over the long run. Hafizan Hamzah is a director at ALM First Financial Advisors joining the firm in 2010. Mr. Hamzah works in ALM First s Investment Management Group and assists in developing client-specific portfolio strategies as well as portfolio rebalancing. In addition to portfolio management Mr. Hamzah is responsible for monitoring and rebalancing hedges associated with the firm s mortgage pipeline and mortgage servicing rights hedge strategies. Hamzah s areas of expertise include fixed income portfolio management mortgage pipeline hedging MSR hedging as well as asset liability management. He received a Bachelor s degree in business administration from Southern Methodist University in Dallas Texas. 27 C R E D I T U N I O N B U S II N E S S B U S N E S S J J UU NN EE 22 00 11 77 C U B U S I N E S S . C O M MA RK ETI NG MATTERS BY BRUCE A. CLAPP Making the Most of Mergers Managing Member Impact Through Marketing For credit union success and growth mergers and acquisitions quickly and efficiently get the job done. They do so by easing both new market expansion and new technology incorporation but there are critical action steps that must take place for them to go off without a hitch. Find out what those steps are. Overview CREDIT UNIONS Q1 2017 40 consolidations (mergers and acquisitions) announced 2016 200 consolidations (mergers and acquisitions) CREDIT UNIONS ACQUIRING BANKS 14 credit unions that have acquired 15 banks since 2012 BANKS Q1 2017 67 announced bank mergers acquisitions 2016 312 announced bank mergers acquisitions acquisitions coupled with strong organic growth are an important tool for sustainable success and growth. M&As are considered a relatively fast and efficient way to expand into new markets and incorporate new technologies. However amid bank and credit union failures rising compliance costs and a shrinking pool of targets success in merger integration must take precedence. For a successful merger to occur there are critical action steps that must take place leading up to the transaction continuing through the process and following to ensure financial cultural and organizational success and an efficient integration. TURN ON YOUR Mergers and acquisitions (M&As) have long been a strategic method for both banks and credit unions to strengthen and or maintain their position in the marketplace. For credit unions the motivation may be a bit different it may be a strategic merger of equals in a new market a fill-in for existing markets or a collaboration of two like-minded credit unions. However for both banks and CUs mergers and 28 C R E D I T U N I O N B U S I N E S S MARKETERS MATTERS withTEAMBUILDER. 4 MARKETING www.cubusiness.com teambuilder buy J U N E 2 0 1 7 C U B U S I N E S S . C O M MARKETING MATTERS TAB Merger Acquisition Consolidation Partner Identification As with any dance you always dance with who brought you. In this case the dance partner is a merger candidate that needs to fit a profile. Your profile has been uniquely developed and refined for your organization. A dance partner that fits you may not fit another organization and vice versa. When you think about your profile you should think of some or all of the following characteristics Culture Does the organization s culture mesh with yours Geography Does the footprint of the partner fit within your current geographic reach extend it or complement it Size This is uniquely your variable. Some financial institutions are more comfortable with only smaller transactions some with equal. Still others seek larger partners. Segment Does the member base complement yours provide a new base or expand the reach of your current member base as noted by product use Asset or liability sensitivity Does your partner complement your balance sheet strengths Understandable financials Make sure you get a clear concise and understandable financial position from a potential partner. Leadership Does the organization have leaders who can add bench strength to your organization Product Innovation Does the organization have a product service or technology advancement that fills an opportunity gap for you So ... what does any of this have to do with marketing Everything We have seen too many organizations get wrapped up in the financials of the deal and forget the soft factors or intangibles that can often derail a successful integration. The most notable is a cultural disconnect between the two organizations. Of course 29 C R E D I T U N I O N B U S II N E S S B U S N E S S every merger or acquisition must make financial sense however if the overall cultural fit is poor it can overpower the financial potential of the deal and create an attrition problem with members and staff alike. This situation has the possibility to cause the financial projections to never reach their potential. Seeking a successful merger partner means thinking of the outcome at the beginning and ensuring all efforts are focused on reducing attrition keeping key staff and laying the groundwork for a smooth transition of members to your institution. Communication to Prospective Institution The communication between a suitor and the partner takes many shapes. Sometimes it s a simple phone call from one CEO to another. In other cases there is a detailed presentation of the pros and cons of the transaction and a formal letter of interest. Lastly some situations arise rapidly from regulators requesting your review and level of interest to participate in a government-assisted transaction for a problem institution. Whatever situation you find yourself in remember that clear concise and value benefit-driven communications are the ticket to success. Yet the value benefit statements cannot be simply manufactured with marketing lingo. The value benefit proposition must include both tangible and intangible wins for the partner staff and members. Hopefully all three will benefit but at least two of the three should experience a win while doing no harm to the third party. Key considerations include impacts to Stock value (for those CUs considering purchasing a bank) Value of the brand The community The leadership The board of directors The staff The product line J J UU NN EE 22 00 11 77 C U B U S I N E S S . C O M MARKETING MATTERS TAB When presenting an opportunity to a potential merger acquisition candidate a What s in it for me approach gains the most traction initially. A What s in it for us approach drives the long-term impact and decision-making. Working with the marketing team to analyze the key market benefits and the brand impact and sharing a concise and professional presentation set the tone for the negotiations and eventual decision. The message platform is a key tactical process that helps your institution chart the message with the audience. This important process also helps define the messaging the channels the preparation time and the individuals or business lines across the organization that will create edit and approve the messaging content. Establishing the Communication Recipe Effective merger communications can be best described as communicate more and more often There is rarely if ever a time when too much communication has occurred. Remember members are trying to absorb what occurred and how it affects them in the context of their busy life. sh THE SIMPLE COMMUNICATION TRIANGLE Key communication points Be consistent. Be value oriented with real value. Communicate small. Don t overlook or underreport. Be multidimensional. Communicate where members intersect with you. One important step in the communication funnel is knowing the impact of how information flows. It s communication 101 but vitally important and many organizations assume their people know what and when to communicate and to whom. Executives managers and staff can only effectively THE COMMUNICATION FUNNEL Executives Managers Staff VIP members Members Marketplace Marketplace ne d Wh pe at ap is ha ha pp en Wh at ing 30 What is going to happen There are two givens with a merger First there will always be members who never knew the merger was happening. Secondly there will be members for whom there are never enough communications. In most cases the recipe for the best communications strategy starts with great data or the best data you can get. The best strategy also includes segmented communications and ground-level messaging that is simple direct and honest. For proper segmenting we look at what accounts members own their mailing address their email address etc. Once the data is cleaned segmented and aligned with the operational details needed it is time to craft the communication timeline and message platform. communicate what they know. Communication needs to be effective clear and targeted for proper action. The next step is developing a timeline and communication strategy plan. A general timeline is anywhere from 12 weeks to nine months with each situation driven by the regulatory approval process shareholder member voting and the type of transaction (acquisition federal agency directed etc.) J J UU NN EE 22 00 11 77 C U B U S I N E S S . C O M C R E D I T U N I O N B U S II N E S S B U S N E S S MARKETING MATTERS Keep in mind that there are at a minimum 30-day required communication timelines for any actions that impact the member. However the minimum is only the starting point and not the ending point. An effective timeline includes the following tactical steps with properly allowed windows of time for editing exception reporting approvals and regulatory reviews (as necessary) Data management screening cleaning and consolidating Message mapping Product mapping Member segmentation Legally required communications Staff communications (both firms) VIP communications (various channels) COI communications (various channels) Member communications (various channels) Timely printing Mailing Retaining Through the Transition Seventeen percent of members leave (attrition) during and after a merger. Staff members leave. Why According to the Deloitte Center for Banking there are two top reasons why members switch their bank or credit union after a merger purely emotional reasons or a competitor s offer. Emotional reasons speak directly to the feeling the member has about the culture and brand of a bank credit union. Staff and members usually experience a significant culture shift. Staff may feel that the requirements and culture of the new organization are not aligned with their personality and beliefs. After announcing a merger or acquisition your competitors will see this as a perfect opportunity to grab more market share by preying on the dissatisfaction of members who do not like the new brand. Whether it is because of emotion or competitive offers from another institution it is important to understand the leading factors and address them head on through your messaging and communications. 31 C R E D I T U N I O N B U S I N E S S Even more concerning is the speed at which these members members make their departure. Of the members who leave 64 percent do so within a month of the merger announcement. Another 21 percent leave within two to three months of the announcement. So over 85 percent of the members leaving do so within three months of the merger being announced. That is a quick attrition pace by any standards. But the more impactful conversion of the core system branch consolidation signage product migration etc. is still yet to come Focusing effort on identifying culturally aligned organizations and investing in communication with members are key variables to success. Retaining the member throughout the transition process is the main function of the communication strategy. Keeping an eye on balances is equally important account balances will begin to siphon off before the member relationship is lost. In discussions with members it is key to remember that change is challenging. Even good change can be difficult. The more communication the more details and the greater the availability of staff to answer questions the better the transition will go and the higher member member retention will be. First realize how and when most of your members are likely to leave. There are typically four waves of potential attrition that need to be monitored and measured. At Deal Announcement At Risk High-value members with lots of options New members with little loyalty Members without sticky services At First Communication At Risk All members Members facing account service or location changes J U N E 2 0 1 7 C U B U S I N E S S . C O M MARKETING MATTERS When Deal Closes and It s Official At Risk Members facing account service or location changes At Risk Members facing account service or location changes High-value members who are everyone else s 1 prospect When the Systems and Signs Change Knowing the waves and addressing the emotional and competitive offers your members will be experiencing is important for maintaining high retention levels. Activating the retention comes with written and digital contact followed by personal contact as much as possible. Clearly you cannot personally connect with 40 000 members ... but you can communicate their importance to you The steps to follow include Address all challenges head on don t hide or cover. Make sure all staff members have talking points to guide their discussion. Ensure there is a communication procedure to escalate member challenges. Ensure there is a method for repeat questions and issues to rise to the top. Be clear consistent and direct in all communications nothing too flowery. be important focal points. However in this period there is a potential for silent attrition. When all staff members have gained comfort members will too but some will simply grow tired of the change and leave the bank. In times of early transition and with a high focus on member behavior these members are easily noted and efforts can be made to retain each account and relationship. In a more normalized period the focus is less on the daily member behavior and sometimes attrition increases. Don t let your foot off the gas keep working the process 1. Include all new members from the merger acquisition in your onboarding process. 2. Continue to reach out to new markets and new prospects. Planning the landing after an acquisition takes patience focus and attention to details. Managing a Split Personality Proper Treatment of the Brand(s) One major question we hear is How should we handle the brand transition The easy direct answer is with strength and in one motion. On one weekend transition everything signs ATMs branded statements etc. TURN ON YOUR Growing Post-Transition MARKETERS MATTERS When life after the transition begins to normalize internally you begin to move to regular marketing strategies and plans. Keeping a mindful eye and increased presence in the new markets and branches and a high level of communications with the staff will withTEAMBUILDER. 4 MARKETING www.cubusiness.com teambuilder buy 32 C R E D I T U N I O N B U S I N E S S J U N E 2 0 1 7 C U B U S I N E S S . C O M MARKETING MATTERS For some this may be operationally challenging or management may be averse to a single changeover. Ultimately we must manage to the reality of each situation. In situations where two brands are in the market for a period of time clarity of communications and expectations is imperative. Start with clear internal communication and translate that to external communications. A few tips Set realistic timelines and communicate on each step. Ensure everyone knows the overall brand is the surviving organization even when there are two brands. Internally spend the time in training all staff on the brand standards and tenets. Externally ensure members know that the bank has a plan and timeline. Conclusion Mergers whether sought out thrust upon us or a good collaborative business decision are more important and prevalent than ever before. The business imperative is retention of the members and the balances and relationships with each of them. A properly marketed communicated and delivered merger can create goodwill and synergy beyond the financial reports and position the credit union for a prosperous future Bruce Clapp aka High Voltage is THE vision and energy that drives everything MarketMatch a marketing consulting and strategy firm he started in 2002. And while much of that power is fueled by Red Bull (we re talking he has a fridge next to his desk) it s also fueled by his 25 years of marketing expertise in various executive credit union and bank marketing leadership positions. While very outspoken about his love of family and anything Ohio State Football Mr. Clapp is quieter about some of his hidden talents like being able to juggle and shoot a 3-point shot He s inspired by making a difference big or small in the lives of others and loves watching Gold Rush on the Discovery Channel though he admits MarketMatch and his employees are his own personal gold strike. 33 C R E D I T U N I O N B U S I N E S S J U N E 2 0 1 7 C U B U S I N E S S . C O M BRA NC H TEC H BY MICHAEL BALL Revitalizing the Branch Fusing Tradition and Tech to Enhance Member Experiences Credit unions have made great strides in member relationships but their branch operations have stayed stagnant. To stay relevant to the modern customer branch innovation is crucial for CUs. Keep reading to learn how to develop dynamic in-branch experiences that will engage your members now and long into the future. redit unions recognize the importance of adopting an omni-channel approach to better serve their members. In fact some would argue that credit unions are leading the financial industry in their adoption of digital technologies as a means of modernizing the manner in which they engage with their members and the communities they serve. The entire credit union industry has made great strides in providing members with ways to conduct business remotely that align with today s technology trends. However the branch is still considered the foundation of the credit union movement and the cornerstone of an institution. While the last decade has brought immense change to the way credit unions transact business with members branch operations have remained relatively unchanged. Opportunities to innovate the branch streamline functions and most importantly create a positive dynamic in-branch experience are available and they should now be a focal point for the modern credit union. Many members most memorable banking moments take place in the branch. From opening an account for the first time to financing a new vehicle or even closing on a new home these financial transactions traditionally happen in branch. Moreover if these experiences are positive they can build long34 C R E D I T U N I O N B U S I N E S S J U N E 2 0 1 7 C U B U S I N E S S . C O M C term relationship loyalty and result in the experience being shared with friends and families. Dynamic inbranch experiences open unique opportunities for credit unions to not only engage but also truly connect with their members. Empowering the Branch with eSignatures Digitizing the branch can create a more compelling inperson experience. It can also drive member engagement to new levels. The digital branch evolution marks a cultural shift toward the experience-as-a-service business model that your members not only expect but have come to demand. Of all the digital solutions TURN ON YOUR TECH STAFF withTEAMBUILDER. 4 TECHNICALLY SPEAKING www.cubusiness.com teambuilder buy BRANCH TECH TAB available to help credit unions better serve members in branch eSignatures is one of the most empowering technologies available today. eSignatures enhance not only service levels by allowing your members to complete and electronically sign documents safely and securely but also security. In addition they increase accuracy and ease compliance burdens while generating back-office process efficiencies that extend across the entire organization. created a more pleasant and secure experience for our members but we have been able to gain efficiencies within our operations as well. Providing our members a consistent positive experience across all channels regardless of where they initiate the transaction is a top priority for our institution. Elevate the Experience Drive Efficiencies Case in Point Delivering the Digital Experience Consumers Credit Union based in Gurnee Ill. has 1.1 billion in assets and nine total branches but it extends its services nationwide with members in all 50 states and lending business in more than 40 states across the country. The credit union has successfully launched a creative new branch approach by integrating eSignatures into its in-branch kiosk environment. Outfitted with video voice and eSignature capabilities the credit union s virtual teller kiosks deliver its members a digital self-service experience while maintaining a personal touch. The credit union introduced its in-branch kiosk model in 2014 and immediate benefits were experienced including reduced member wait times in the branch. Increased levels of service and focus also resulted by channeling members to an expert in the area of business in which they requested. The credit union quickly realized that continuing to require paper documents and wet signatures within the branch would greatly stall the process. The CU had relied on eSignatures throughout its organization for more than a decade so integrating this proven technology with the credit union s modern kiosk branch environment was a natural progression. Adding eSignatures extended the convenience and enhanced the security of the kiosk environment thereby allowing members to complete transactions in their entirety at the kiosks. Amy Lopez vice president of member experience at Consumers Credit Union stated By incorporating electronic signature technology we have not only 35 C R E D I T U N I O N B U S II N E S S B U S N E S S The typical lifecycle of a single document can be tedious. From needing multiple signatures to indexing the document for archival into an imaging system the end-to-end document management requirements have traditionally created barriers among back-office efficiencies member service and geographic borders. Streamlining internal business processes is on the wish list of almost every single financial institution. Creating a unified and integrated ecosystem to handle document processing demands breaks down these barriers for an easy automatic and safe means of channeling new efficiencies. Manchester N.H.-based Bellwether Community Credit Union s strategy relies on limited branching in favor of a reliance on remote transaction delivery. An internet connection is typically all that members need to close loans and eSignatures technolgy has enabled the credit union to migrate almost 50 percent of its direct consumer loans to remote closure. In its branch network Bellwether relies on tablets to ensure all loan closings are completely electronic. That way both the time and expense of paper-based forms are reduced. J J UU NN EE 22 00 11 77 C U B U S I N E S S . C O M BRANCH TECH Jeff Benson senior vice president and CIO of Bellwether Community Credit Union commented We have been able to enhance our members experience and increase our operational efficiency at the same time. Bellwether CCU has built a brand on making things that could seem difficult to a consumer easy and hassle-free. Implementing this kind of technology has enabled us to deliver on our brand provide exceptional service and drive down costs. Since eSignature transactions are completed in a totally electronic environment they are a more secure compliant and efficient means of handling private information. Paper documents and the liability associated with trying to protect them are hard to control and challenging to secure. Electronically signed and sealed documents are more secure than their paper counterparts because they contain more information about who signed them. What s more they can be protected from unauthorized tampering. More ID theft can result from paper transactions because they are easily lost stolen or forged. Electronic documents avoid and mitigate that historic paper-based challenge. Conclusion The branch remains a vital and well-trafficked component of a consumer s financial lifestyle. Innovation at the branch level provides better service to members and these experiences are some of the very best opportunities for credit unions to strengthen and expand member relationships. Therefore modern financial institutions should not neglect technology innovations that can create a dynamic integrated and memorable member experience. From the consumer perspective everything that goes into comprising an in-branch experience from the technology and service support to the product offering simply becomes part of the total experience. Such an experience shouldn t be an unintentional byproduct of how these components come together. By adopting compliant digital signatures credit unions can answer the challenges of today s economy the need to control costs increase efficiency and improve the member experience while adapting to new technologies. The tools that help financial institutions power real branch transformations will continue to define banking and the progression of consumer interactions. Michael Ball is vice president of product strategy for Linden N.J.-based Integrated Media Management. The company develops and delivers innovative technology than enables financial institutions to streamline business operations and processing environments through electronic document presentment workflow automation and Web tablet and pad-based electronic signatures. 36 C R E D I T U N I O N B U S I N E S S J U N E 2 0 1 7 C U B U S I N E S S . C O M COO P ERATI VE GOVERNA NC E BY CLINTON KOKER Conflicting Messages Create Poor Employee Morale I There s a fine line between boosting employee morale with excellent reviews and staying within budget when it comes to rewarding such excellence. What s a credit union to do Read on for a degree of separation between the performance review and the merit increase that offers a viable solution. t was a typical day at the office when the vice president of development stepped in and requested I recruit a programmer. Our busiest time of the year was upon us and we needed to replace a programmer who had resigned. Actually busy is an understatement. You see our company produced income tax software and the production time was short with tons of work to do so work hours were about to jump from forty hours a week to sixty or seventy hours a week. Please find me someone who can write code in Fortran Basic and C . Also they will need to be high energy to get through the tax season. Oh also find someone who is a very hard worker and an excellent programmer he requested. Then as if awaking from a dream he simply said Wait the programmer who is being replaced was average so just hire the most average person you can. Then he left. Of course he did not want to hire the most average programmer we could find. He wanted to hire the best programmer we could find. So why did he make this strange request A little perspective is needed to understand what he was telling me. We had just implemented a pay-for-performance program. A merit increase matrix was created and budgets were developed from that matrix. We could easily establish with great precision where each 37 C R E D I T U N I O N B U S I N E S S J U N E 2 0 1 7 C U B U S I N E S S . C O M employee fell within his or her salary range. The only other factor was planning what each individual s performance evaluation level would be. To do that we utilized everyone s past performance ratings. After all the company s performance had been pretty constant so it was reasonable to assume overall employee performance (productivity) would be consistent with pervious performance. We had a good budget or so we thought. What actually happened was quite different from what we planned budgeted. Within the first quarter we spent most of that year s salary increase budget The CFO was in a panic since we still had another three quarters to go and salary increases were about to go well beyond budget. Why are we in this situation he asked. That s when we discovered our assumption about performance ratings was wrong. Employees who had consistently met expectations were now exceeding expectations. As it turns out managers were rating employees higher to get them a larger merit increase. Their actual performance rating was not so much based on their performance as it was the managers desire to give as much as they could in merit increase. We solved the problem by establishing a bell curve requirement. Managers could have only a small percentage of their employees appraised above meets expectations which is typically considered average or a C on a five-point scale. By the way nobody wants to be considered average. It worked for the budget. However it also sent a very bad message to our employees which was you are an average employee. The VP of development was making that crystal clear when he told me to recruit an average programmer because the one who left was rated an average performer. The problem was that we were sending conflicting messages to our employees and our managers. On the one hand we seek to hire the best of the best. If we could have our dreams come true every employee we hire would be a superstar and get the highest possible performance rating. On the other hand we had a budget to manage. A large part of that budget was in salaries. Forcing our managers and supervisors to rate an employee as average was stressful for the manager and sent the wrong message to the employee. To solve this self-created problem we developed a degree of separation between the performance review and the merit increase as follows. 1. We asked our managers to evaluate the employee fairly and objectively. That included developing performance plans that are objective and or observable and spending time with the employee to help him or her achieve his or her objectives. At the end of the review period we wanted the focus on progress made against each employee s performance plan and not a score. 38 C R E D I T U N I O N B U S I N E S S J U N E 2 0 1 7 C U B U S I N E S S . C O M COOPERATIVE GOVERNANCE 2. We discontinued giving merit increases at the same time that we conducted the performance review. When the merit increase was given as a part of the performance review the employee tended to center on the merit increase rather than the actual performance evaluation and plan for the coming period. 3. Instead we gave all merit increases at the same time each year. Performance reviews were conducted on each employee s job anniversary date. We also gave managers a report at the end of the year that identified all of his or her employees last performance ratings. Managers were allowed to make modifications if they could justify the change. 4. We then built the merit increase matrix and ran the numbers. We could adjust the cells in the matrix to ensure we met our budget for the year. When a merit increase was given each employee was told it was based on three things 1) the budget 2) establishing internal equity within the organization (actually the employee s position in range) and 3) the managers assessment of the employee s contributions for the year. Clinton was most recently the CEO of Koker Goodwin & Associates a consulting firm specializing in performance-based compensation programs for credit unions and built around Compease the software Clinton developed for suggesting ranges and grades of salary for every job-title in the organization. The partners sold the firm to HRN after adding more than a thousand client credit unions throughout the United States. Clinton also specialized in developing performancebased compensation programs for numerous CEO s and management teams. Working with the boards of these credit unions he helped develop key standards and measures of performance that ultimately resulted in an objective way to establish merit increases and incentive pay. He was also served in the creation of long-term deferred compensation plans in executive recruiting and in contract negotiations. Clinton has worked with credit unions for more than forty years first as an employee then as a consultant and throughout as a volunteer. He served on the board of a credit union for ten years. The results were positive. The stress and negativity associated with performance reviews decreased among both employees and managers. We even began to get reviews finished and submitted to HR on time But most of all we quit sending conflicting messages. In time we went to the point where we found it totally unnecessary to share the performance rating with the employee. Its only purpose was to justify the merit increase and it had been manipulated to justify such increase or to manage the budget neither of which has anything to do with trying to hire the best and keep them motivated. Clinton holds undergraduate degrees in Business Administration and Labor Economics. He has held Certified Compensation Professional (CCP) and Senior Professional in Human Resources (SPHR) certifications. He also taught entrepreneurship at Wichita State University. With almost forty years of senior human resource experience and twenty-five years building a consulting practice he speaks frequently at national and regional conferences. 39 C R E D I T U N I O N B U S I N E S S J U N E 2 0 1 7 C U B U S I N E S S . C O M BRA NC H BUSI NES S BY KAITLIN MORRISON Indirect Auto Lending Best Practices One credit union has found prosperity in auto lending by keeping its members informed and engaged. Discover what this CU s Top 3 best practices are and how to apply these secrets to success to your indirect lending program at both the corporate and branch level. A t the start of 2017 we talked about automotive lending and shared some ideas for creating an effective indirect lending program. For this issue we spoke with two leaders at Greater Nevada Credit Union about their auto loan program and how they serve their members by helping them get the financing they need. This credit union emphasizes financial education right at the start and keeps members informed and engaged so they do not feel lost during the process. Greater Nevada shared their best practices with us and we have three great takeaways from our conversation. From there we will talk more about branch best practices including compliance and training issues at the branch. Best Practice 1 Reassure your members and avoid making assumptions. The start of every lending conversation is your opportunity to encourage your members begin arming them with knowledge and help them feel confident. Your members should not be frightened of the process. Ask for clarification on anything that you don t fully understand there are no dumb questions says Tom Wambaugh VP of Member Services at Greater Nevada Credit Union. If your member needs a little reassurance that is okay. Remember not everyone has the same level of experience with auto buying. A big part of the loan consultant s job starts with finding out where the buyer is in terms of his or her loan and financial knowledge. Not everyone needs a detailed play-by-play of the 40 C R E D I T U N I O N B U S I N E S S Tom Wambaugh VP of Member Services at Greater Nevada Credit Union lending process but some of your members are also beginning with very little or no loan know-how at all. This is the moment for your consultant to triage the member s experience and research level. Wambaugh suggests that loan consultants prep for every new loan conversation by avoiding assumptions about the buyer. Each member is bringing a different level of experience confidence and financial preparedness. TURN ON YOUR BRANCH SUPERVISORS & MANAGERS withTEAMBUILDER. 4 BRANCH BUSINESS C U B U S I N E S S . C O M www.cubusiness.com teambuilder buy J U N E 2 0 1 7 BRANCH BUSINESS Best Practice 2 Bring the right education to every loan conversation. After pre-approval your member s financial picture will guide the way through the education budgeting and shopping steps. Having your financing in order prior to shopping for your next vehicle eliminates some anxiety and lets you focus on making sure you make a great vehicle choice Wambaugh adds. By having every member get pre-approval at the start Greater Nevada is able to identify members who may want or need additional help before they make the purchase. The credit union s member consultants know which financial education programs to suggest and how to help applicants who do not feel ready for a loan right now. From there members can get a personal plan to shape up their finances for a loan or to prep for better loan options in the future if they are looking for lower rates than what they currently qualify for. Maybe a loan is not right for the moment but that does not necessarily mean applicants are far away from the right car. Best Practice 3 You don t have to choose between member service and following metrics. Your success requires that members get the service they need and that your lending program remains viable. Embrace the challenge and hold these two benchmarks in tension. If your program is working your members will get the services they need and buy the cars they are looking for. Along the way your credit union also needs to promote the long-term viability of your auto lending program. Auto lending success can be defined by market share portfolio performance and member-to-loan ratios. Ultimately a successful program should provide our members with flexible loan options that are priced competitively says Marcus Wertz VP of consumer lending at Greater Nevada Credit Union. Using performance benchmarks is not inconsistent with member service. Your members need a competitive program that will be around whenever they need a loan. Keeping the program strong requires solid stable planning along the way. C R E D I T U N I O N B U S I N E S S Applying Best Practices to Your Indirect Lending Program at the Branch Consumers are increasingly turning to credit unions for financing. According to the Federal Reserve s March 2017 report on consumer credit credit unions have seen several years of fairly consistent consumer credit growth. How your credit union manages and guides this growth is important. Effective staff training strong relationships with dealers and effective benchmarks to help you navigate market changes are particularly key. Working closely with the dealerships develop contracts that protect your organization and your members. Know how to grow these dealer partnerships over time and protect your lending program by managing risk and compliance issues. At the branch level there are specific steps you can take to advance these goals. In addition to Greater Nevada s insights on auto lending consider how your branch is doing in each of these areas Preventing Fraud At the branch level all staff should know your credit union s policies and consistently apply them. Data should be secured appropriately and access to information should be restricted. This is a vital part of your organization s due diligence in protecting your lending program. Any potential source of fraud should be watched carefully and your organization should take steps to safeguard itself. Staffing Levels Your program needs enough staff to reasonably divide the loan responsibilities if your lending is done in-house. No one person should be responsible for every aspect of the program. This division of duties may help reduce your liability and ensure that your policies are appropriately applied. Fair Lending Even if your credit union applies fair lending policies very carefully as a whole every person at every branch should know where your organization stands on these issues. This is a very important area for lending. Discrimination against borrowers for 41 J U N E 2 0 1 7 C U B U S I N E S S . C O M BRANCH BUSINESS protected characteristics is inappropriate and may jeopardize your entire loan program. Branch-level associates are a strong asset to auto lending so make sure they regularly review your policies and understand their roles. Compliance issues may occur at any point in the lending process without appropriate policies guidance and planning. Your branch may need a self-audit to identify weak areas and to look for ways to improve. struggle for their branch they can also reach out to upper management for guidance and suggestions. Your organization and your members rely on every aspect of your lending program. Consistency and care will help your leaders and team members find their next goals and appropriately follow them. At every stage of the process your willingness to reconsider your choices and watch your environment will help you stay prepared for new opportunities. Prepare for Responsible Growth As you train employees build your auto lending program and educate your members be prepared to manage this next phase of growth carefully. Best practices may help as you carefully plan how your branches will help you serve your members better. Balancing the right metrics watching compliance issues and conducting audits of your lending programs may help you keep these loans available without sacrificing competitive rates. However you manage your lending strong communication with branch employees and thorough training will help them provide members with the right information and options. Loan consultants whether or not they are at the local branch must know what resources to offer members and how to provide the right financial education. Branch managers have a significant role to play in this process and can demonstrate best practices to their teams. If a particular practice is a In addition to covering Branch BUSINESS for CU Business Kaitlin is a freelance business writer based in Central Washington State. She is passionate about educating her readers and is a proud credit union member and supporter of credit unions. You can read more of her writing at www.kaitlinmorrison.com Sources 1. 2. 3. https www.federalreserve.gov releases g19 current https www.ncua.gov Resources Documents LCU2010-15.pdf https www.cues.org article view id Loan-zone-indirect%E2%80%93lending 42 C R E D I T U N I O N B U S I N E S S J U N E 2 0 1 7 C U B U S I N E S S . C O M MEMBER BUSI NES S BY SUNEERA MADHANI How Credit Unions Can Cut Costs for Small Business Customers If you re like most credit unions small businesses are your bread and butter. Your success hinges on their continued success. Payment processing costs and loan denials may be getting in the way of that success. Here are some tips on how to overcome these obstacles. recent partnership between merchant services provider Fattmerchant and Axiom Bank is indicative of a new frontier in effective mutually beneficial partnerships for credit unions and community banks with payment processors. For the more than 5 000 U.S. credit unions small business banking makes up a large portion of its customer base. The relationship small business owners have with their credit union can make a massive difference in the success or failure of a company. Consider the role your credit union plays for each of your small business customers. Most entrepreneurs come to their bank or credit union looking for help in getting their big idea off the ground. Whether it comes in the form of a loan a new account or just simple guidance a credit union can be a business s most loyal ally. While your credit union may be supportive through a company s shaky beginning that support shouldn t waver once it s on its feet. In fact your branch should be even more creative coming up with ways to keep putting money into your customers pockets. One of the most surprising ways businesses lose money is through payment processing. Every swipe of a card online purchase or automatic payment has a price tag associated with it for every company. However for certain merchant services providers that price tag may be much higher than others. For credit card transactions the interchange rate or the direct cost of every transaction is set by the credit card companies 44 C R E D I T U N I O N B U S I N E S S J U N E 2 0 1 7 C U B U S I N E S S . C O M A and is the same regardless of which provider your customer uses. In addition to this rate however some processing providers may be introducing additional unnecessary markups. Whether it s a brand new entrepreneur who just opened the doors to his or her first business or a seasoned professional these fees can add up quickly easily cutting into bottom lines. Banking institutions traditionally use third-party vendors to offer merchant processing services. Most of these merchant processors charge high markups such as ancillary fees and long-term contracts with substantial penalties. However these institutions especially community banks and credit unions are turning over a new leaf of modernization when it comes to the types of payment processing they recommend to customers. Take the case study of Fattmerchant and Axiom Bank for example. MEMBER BUSINESS Enhancing Value-Added Services through Innovation and Customer Service Credit unions main goal should be to build a symbiotic relationship with the small business owners who choose to do their banking with them. Since credit card processing can turn into such a headache for these types of customers many credit unions partner with a thirdparty merchant services provider to not only automate the service for small business owners but also have a recommended method for transactions on hand. The occasional roadblock however is determining the best fit for said partnership. In the case of Axiom Bank there was an opportunity to significantly improve transparency. The bank recognized that its customers were looking for clarity not just in their banking practices but rather in every aspect of their business. Payment processing falls directly under that umbrella and it s slightly notorious for its pitfalls when it comes to being open about fees bills and contractual obligations. After a discovery session with Fattmerchant where the bank discussed these ideals and goals for both its branches and its customers it decided to move forward with the partnership. Now Axiom s small business customers are receiving much more than the original clarity that was requested and required for the payments partnership. The flat rate option provides business owners with the ability to accept credit cards payments while always understanding what they owe. For physical terminals point of sales online shopping carts and APIs the membership provides business owners access to the direct cost of interchange with no markups. Added up it s saving businesses an average of 40 percent month after month. For business owners who opt to use online and mobile technology payments can be processed at 2.9 percent of the transaction. more than big banks and larger financial institutions. Particularly for nonprofit credit unions forming a bond with your customer where transparency and honesty are your top priorities is paramount for the success of a branch. A partnership like Fattmerchant and Axiom can give your customers an entirely new network of people to help make sure their business is running smoothly and their returns are increasing with each passing month. For instance Fattmerchant provides around-the-clock assistance to make sure no customer is ever on hold with an automated voice for hours. Instead clients talk to real people receive real advice and know exactly what they re paying every month similar to the treatment they receive at your credit union. What Else Can You Do The Takeaway For Axiom committing to a payment processing partnership became much more than a simple recommendation system. Community banks and credit unions rely on the aspect of human interaction much 45 C R E D I T U N I O N B U S I N E S S While payment processing makes up a large part of unnecessary costs for small business owners there are certainly other ways for smaller financial institutions to help them save money. One of the biggest and most obvious ways to help is through a small business loan. The time period following the recession was the time for credit unions to shine. You have the ability to be more flexible and more willing to provide these loans especially when the business is localized and will help build the community your institution is a part of. The great thing about credit unions is the chance to be more forward-thinking when it comes to your client base. Once you ve provided the loan to get a small business off the ground you have a chance to develop a steady relationship and provide recommendations for technology and other programs that keep services valuable far beyond the initial loan. Consider partnering up with a payments processor in your community or even partnering with other local businesses to provide credit or debit cards to help the entire community save money. Whatever you choose remember that your credit union has the ability to build strong relationships that most other financial institutions lack. Use this power to ensure your customers are keeping track of their finances in the most effective ways possible. J U N E 2 0 1 7 C U B U S I N E S S . C O M MEMBER BUSINESS Suneera Madhani is the CEO and founder of Fattmerchant a payment processing provider offering transparent pricing and innovative technology. After graduating from the University of Florida and establishing herself in a merchant services career Madhani quickly realized business owners were frustrated with their providers due to a lack of transparency and never-ending gimmicks. She founded Fattmerchant with the promise to establish a transparent merchant services company offering financial and strategic value to the everyday business owner. 46 C R E D I T U N I O N B U S I N E S S J U N E 2 0 1 7 C U B U S I N E S S . C O M A cold-pressed dilemma. A hot date for dinner. Every transaction has a story. Sometimes small decisions have the biggest impact. That s why PSCU offers a robust suite of card programs that address your members needs at every step of their day. As the nation s leading CUSO we provide feature-rich Visa and Mastercard programs that attract members and help you earn their loyalty. Life doesn t stop. Neither do we. That s our story of service. pscu.com credit 844.367.7728 Editorial Calendar 2017 Editorial Closing Dates 30 Days Prior To Publishing Money January February March April May June July August September October November December Payments Credit Debit Cards Car Wars Auto Lending Mortgage Lending Mobile Banking Security Branch Business CUSOs Executive Hiring & Compensation Auto Lending & Lleasing 2 Mortgage Lending 2 Payments 2 Business Lending THE ONLY A LL-D I G I TA L A LL-B U S I NE SS RE SOURCE F OR CRE DIT UNIONS